The Hindu Business Line : ‘Rubber Board will ask growers to hold on to stocks’

Kottayam, July 4 The Rubber Board will ask growers to hold on to stocks and also push for more exports through its own companies, according to Mr Sajen Peter, Chairman of the board. A meeting of rubber exporters has been called by the board in connection with this.

Pointing to out his earlier suggestion to farmers to not hold on to stocks, he said he would not hesitate to come out with another plea asking them to not release their produce.

Corrective Phase

“There is no need for farmers to panic. If you ask the farmers in Thailand, Malaysia or Indonesia they would say it is a corrective phase.

Our farmers having seen the prices at three digit heights are anxious to see the rates touch the Rs 100-mark again. Let them forget this figure.

The present situation is only a corrective phase because the supply shortage of rubber is clearly established by international agencies,” he said.

According to the projections of the International Rubber Study Group – which conducts regular studies on rubber prices, production and consumption – the supply shortage would continue till 2020 in spite of the additional production from the non-member nations of the Association of the Natural Rubber Producing Countries.

Petroleum Prices

“Production will increase, particularly since farmers will be motivated by high prices. Consumption also would scale up of the hike in petroleum prices which means that the substitution of synthetic rubber is not possible. This is the international phenomenon. Anyway, the expectation is that the prices will not decline beyond a point, “ Mr Peter said.

International futures, particularly TOCOM, were very volatilite and among participants in domestic futures, only a minority might be actual buyers, he said. “It is like investment and people try to make money whenever they get an opportunity. The same factors are applicable in international markets also,” the Rubber Board Chairman said.

Higher global rates

He also sought to know why there should be a difference of Rs 10 between the domestic and international prices when the prices were fully synchronised. “Last year, we exported the maximum when there was this price gap. But now, our target is to export 10 per cent of our total production. If we can achieve it, the price difference can further be narrowed down to Rs 4 or 5,” he said.

During the current fiscal, exports are restricted to Rubber Board-sponsored company, Periyar Latex.

Almost 50 per cent of the export is done through this company. Exports have registered a sharp fall compared with last year because of the rupee strengthening against dollar and falling profits.

“But the very important of all is the role played by a few stockists during last November, December and January when they joined together to enter in the futures and raise the prices artificially above international level by Rs 10. At times, the difference shot up to Rs 12 and Rs 13,” Mr Peter said.

Gathering Momentum

“They succeeded in creating an artificial situation. Never before has this happened. There is also no rationale behind such a move. At a time when the availability was high, prices were jacked up deliberately.

They had enough stock as they procured it sufficiently earlier. They did it for their own personal gains. As the exporters left the scene, those who entered into contracts for export faced difficulties, he said.

“In short, all our efforts during the last two years especially during the first six months were rendered waste. Now it will require another six months to gather momentum as we did at the beginning,” Mr Peter said.

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